Purchase of LNG plant worth considering

Posted: Friday, March 26, 2010

The announcement last week that a natural gas supply cooperative and the Alaska Natural Gas Development Authority have offered to purchase the North Kenai liquefied natural gas plant comes as interesting news here on the Peninsula, and is something worth serious consideration.

The LNG plant, which has been in operation since 1969, is owned and operated by ConocoPhillips and Marathon Oil. Liquefied natural gas from the facility is exported to Japan.

However, the export license is up next year, and ConocoPhillips and Marathon have yet to file for an extension, a move that leaves us here on the Peninsula wondering what comes next. In addition to providing good jobs and employees who contribute greatly to the community, the LNG plant has become an important cog in delivery of natural gas to Southcentral consumers, helping to ensure needs are met during peak demand in the winter months.

Harold Heinze, ANGDA's CEO, recently told a state legislative committee that the offer to buy the plant could follow two paths. The cooperative and ANGDA could buy the entire facility, or they could invest in regasification facilities, possibly in partnership with ConocoPhillips and Marathon. The facility would continue to help regional utilities meet peak demand, and LNG could be loaded onto barges and shipped to coastal communities around the state, where gas would replace the diesel fuel now used for power generation.

To say the natural gas picture in Southcentral Alaska is complicated might be a vast understatement. There are a lot of moving pieces right now, and as many questions as there are answers. A bullet line, big pipe to the Lower 48, more exploration in Cook Inlet, national and global markets -- there's a lot in play at the moment.

The offer to buy the LNG plant, at the very least, keeps an important asset in play for the near future. Shutting the plant down when its export license expires would be detrimental not just to the Peninsula economy, but to the oil and gas infrastructure we currently have in place.

By keeping the plant operating -- even if its role changes -- we keep an option on the table for when the dust does settle and the path forward becomes clear. The plant is a valuable asset to the Peninsula, and could benefit even more Alaskans in years to come.